[Recorded by Electronic Apparatus]
Tuesday, May 9, 1995
.0906 
[English]
The Chairman: Good morning, everyone.
First of all, with the unanimous consent of the committee, I'd like to call votes 15, 20, 25, and 30, under Health. The witnesses we're going to hear this morning are here pursuant to those headings of expenditure.
We welcome Dr. Friesen, from the Medical Research Council of Canada. Welcome, sir. Would you introduce your colleagues. We'd like to have a brief statement from you.
Dr. Henry Friesen (President, Medical Research Council of Canada): How brief?
The Chairman: It can be longer than five minutes, but we're only going to hear five minutes because then we'll cut you off so we can have some questions. We found on some past occasions that in our effort to be extremely courteous to the witnesses we were discourteous to our own agenda. That is to say, if the witnesses talk all of the time, we don't get a chance to ask any questions to find out what's on their minds. So if you would indulge us, we'll indulge you.
Dr. Friesen: Good morning, Mr. Chairman. Ladies and gentlemen, I'm pleased to introduce my colleagues: Ian Shugart, who is the executive director; Guy D'Aloisio, who is director of finance; and Denis Saint-Jean, who is director of communications.
I think the documents that have been distributed to you indicate fairly the financial and operational activities of the council. The path charted for the council is outlined in broad terms by our strategic plan document, which has three major thrusts: that the council will embrace a full spectrum of health research, beyond the biomedical research that has been emphasized over the years; at the same time, we will continue to enrich and focus on that emphasis; and we will be more rigorous in the evaluation of everything the council does. Those are the three broad directions we are pursuing as a result of the strategic plan exercise, which consulted very broadly across this country in the 1991-92 era.
The MRC is a $250 million hub in a $1 billion public investment in health research. I think that metaphor characterizes the role of the council, to be more than a granting council but to be a coordinator, a facilitator, a consensus builder, and a catalyst, to ensure that there's a coherent approach to health medical research across this country.
We work in partnership, in strategic alliances with a wide variety of bodies, with the provinces, with voluntary agencies, and with community-driven initiatives. We recognized early on that there is never enough resource to support all of the worthwhile projects we face so we moved ahead aggressively to look at new funding opportunities. You have before you this morning the document, which looks like this, which outlines five new funding opportunities the council is pursuing.
.0910
There's our base budget of approximately $250 million a year. Over the next five years that's $1.2 billion. The four new pathways in aggregate constitute an additional $2.1 billion of research opportunity that could result if we are successful in pursuing the strategic alliances and partnerships, both with the private sector and other public sectors.
One initiative I draw your attention to very specifically is the tech-transfer commercialization fund, a Canadian medical discoveries fund, which we caused to be launched this past year. It's been very successful in encouraging Canadians to invest in discoveries in Canada and to move away from the notion that we discover, they develop, and we buy back.
The fourth pathway is health research. That's an important initiative that we seek to champion, where we see health research being increasingly important in renewing the health care system in this country.
I'd be pleased to answer questions on these pathways because I believe collectively, in aggregate, they create the opportunity to maintain Canadian science at a competitive level. So I'd be pleased to answer any comments or any questions about the council's activities.
[Translation]
Mrs. Picard (Drummond): Good morning. I would like to know if the medical research council supports health research carried out by the private sector, including the pharmaceutical companies. If so, how much money will the pharmaceutical companies receive in subsidies in 1995-96? What will be the main research projects you will be supporting?
[English]
Dr. Friesen: One of the initiatives we undertook early on following the passage of Bill C-91, and indeed concurrent with that discussion, was to challenge the pharmaceutical industry to invest more aggressively and determinedly in Canada. We negotiated with the Pharmaceutical Manufacturers Association of Canada a joint agreement whereby they committed to investing $200 million over the next five years. The agreement began last year. That's $40 million a year, and approximately an equal proportion should be directed to the support of young people in training, the support of scientists' salaries, and the other half in projects.
These initiatives are company-driven, but they must have a partner with a scientist working in the university sector, and come forward with a joint proposal that we then adjudicate under the MRC guidelines and rules on the basis of excellence.
I think it's fair to say that the first year of the program was a little slower in evolution than we would have preferred, but of course it requires change in attitudes - change in attitudes of the academic community, change in attitudes of the private sector, the companies. I think that's beginning to happen. We will continue to encourage and try to enhance the evolution of that process.
We have set as a target $40 million a year. The last year the company contribution was $15 million. The ratio of the agreement is that for every $4 companies invest, MRC, as a co-partner in the funding, invests $1. It's a 20% investment, so the $200 million captures ultimately $50 million of support from the council.
There is quite a variety of projects. They range all the way from the most fundamental research to clinical trials. In my view, industry in this country regrettably has too little fundamental research, but the organization of the pharmaceutical industry is international. We hope by this process to capture more of the international research investment dollars into Canada because the climate of opportunity is highly competitive. In my view it's very competitive, especially now with the lower dollar value, with the excellence of Canadian scientists and with a marvellous health care system. I think all of those elements are very important in making the case to industry. I have made a substantial effort in meeting with industry representatives to try to encourage greater investment in Canada.
.0915
You should know that in the last 10 to 12 years government support for health medical research has increased twofold, provincial governments approximately twofold, and industry investment 22-fold. That's a real growth opportunity for us. Capitalize on it.
Mr. Hill (Macleod): If I read the estimates well, the MRC seems to have done fairly well. Would you comment on how your budget has stayed fairly static?
Dr. Friesen: Fairly well, as you would know, sir, is in the eye of the beholder.
It's quite clear that we have done well, given the very tough fiscal climate we're in. We also have to look at international comparisons, where I must say we haven't done quite as well. However, in the Canadian context I would agree with you entirely.
Our budget over the next three years was reduced 5%, 7.5%, and 10%. No one likes a reduction; we know that. But the reality is that the Minister of Finance has quite properly recognized the difficult economic fiscal climate and regime we're in. In the spirit of fairness, the council's budget too suffered a reduction.
The minister has pointed out that one of the reasons our council fared perhaps somewhat better was the result of the strategic direction we undertook to move into health research more broadly - health outcomes and health evaluation research. We did that quite deliberately, even though there was no promise in advance that there'd be more money.
In that sense we tried to include this new research portfolio within the framework of our budget and now with a reduced budget. Yet when I look ahead for the next year, because of some of these initiatives we've undertaken I can identify $50 million or $70 million of new money that will be invested in Canadian health research. Let me specify.
The Canadian Medical Discoveries Fund has raised $50 million. For every dollar they invest, there are four additional dollars they bring to the table because they go out and find partners to spread the risk. It's a bit like drilling for oil. There are multiple investors and reduced risk. Their $10 million to $12 million investment will in fact lead to a $50 million investment in health research.
Through the MRC-PMAC initiative, there will be a $25 million to $35 million investment. That's new money.
For the first time, one of the generic companies has indicated a partnership, just like the PMAC companies, of $4 million.
There is the Juvenile Diabetes Foundation International. Mr. Marc Lepage - who unfortunately couldn't be with us today because his daughter suffered an attack of appendicitis last night - has negotiated with the Juvenile Diabetes Foundation International an $8 million investment over the next few years.
Those cumulative examples tally up to close to $100 million. We suffered a $13 million reduction.
Notwithstanding the difficulties, I remain convinced that the health research sector in this country is a growth sector. It's one of the areas that will generate jobs, high-tech jobs, for many of the young people graduating from college.
Mr. Hill: When you look at health outcomes, which is something that is not well researched in international senses, you're obviously looking at things we do well and things we do less well. Would you suggest that things we do less well in Canada should be taken out of the public component of health care in the broad sense?
Dr. Friesen: My view is that given the limited resources it's hard to make the case that the hard-earned taxpayer's dollar should support interventions that have not been shown to be beneficial. We should at a minimum try to identify what interventions are really beneficial based on hard evidence, not on tradition, not on past practice, not on historic approaches.
.0920
Mr. Hill: And stop doing things that are inefficient.
Dr. Friesen: Yes, absolutely.
Mr. Hill: If you were selling the MRC to the Canadian public, what flagship basic research project would you use as the example of how basic research has an impact on the lives of Canadians? Is there one flagship project?
Dr. Friesen: I would perhaps make reference to Rh disease. I don't want to appear to be parochial. It's a discovery made in Winnipeg by Dr. Bruce Chown. He identified that the antibody transmission across the placental barrier was a significant element of the process. It was common. Ten percent of newborns were affected. Today, it's been eliminated virtually worldwide because of the discoveries made in Winnipeg. It wasn't solely made in Winnipeg, but the seminal work was made in Winnipeg.
The other point to recognize is that research also improves the quality of health care in a community. It attracts the best people to that community. Thereby, it has a secondary, ripple effect on the quality of care and the spirit of inquiry and the residency programs are enhanced.
In my view, there's a seamless web between research, health care delivery and health status. All those elements are part of the MRC direction. The strategic plan, which specified that MRC should move into health research, was absolutely the right decision because increasingly there's major opportunity for renewal of the health care system to help those policy-makers make tough choices based on sound information delivered by research.
Mr. Jackson (Bruce - Grey): Dr. Friesen, the last major review we did on health was with the Hall report. You may correct me if I'm not right on that. It was said that we spent about 10% of our GDP, some $72 billion, on health care.
To some degree, Dr. Hill asked about this and you answered him partially. What are your views with regard to public and private sector participation? Where does one begin and the other end?
I'm looking for ideas. We always seem to toy with this and we've had a lot of changes. We've had a lot of paradigm shifts in terms of the use of computers and technology. We're not using hospitals as warehouses any more and things such as that. I'm looking for ideas as to how we're going to move on to the year 2000 and beyond.
My second question is with regard to breast cancer. There seems to be a lot of concern about it. Are we making any strides? Is it being improved?
Dr. Friesen: Let me begin with the first point, are there new ideas that would be helpful in the renewal of the health care system, which Canadians so rightly cherish.
The figures you quote are right in terms of the investment in health care by Canadians. It's about 10%, although I'm told the recent figures may show some downsizing or a downward trend of that number. We know that in other developed countries it's as low as 6% to 8%. Judith Maxwell's study reported within the last three months pointed out that just by identifying some of the best practice management tools, one could envisage substantial savings of the order of 5% to 10%. That would reduce it to 9% or 8.8%, or somewhere near that.
However, the really important challenge is to move beyond current best practices because then we would do all those things, including some of those unproven things, perhaps more efficiently. My view is that the real scope for the re-engineering and restructuring, which is happening throughout business, needs to be applied to the health care system as well.
.0925
It's interesting that this year, for the first time in Canadian history, the deputy ministers of health of Canada are going to talk about research. That is an interesting revelation, in my view. It says that the essence of research is being integral to improvement, innovation, and renewal. It hasn't captured everyone's imagination to the degree it should. In any other corporate sector, the research portfolio would be known to be the vital element that would be essential to renewal and maintaining, at a competitive position, that business. What's true for business is also true for the health care system. We have to challenge ourselves to look very carefully at all great ideas and be imaginative and innovative in pursuing them through research.
The second issue you raised was breast cancer. I'm sorry to have to tell you that after billions of dollars of investment, the unfortunate reality is that the mortality rate from breast cancer remains the same. That's not to say that we haven't new knowledge, new tools, and new ways of improving the quality of life of individuals with breast cancer. But I think what it really does say is how complex the issue of cancer is. We now know that it's multi-dimensional, that there are genetic influences, and, within the last year, that there is a major gene that leads to susceptibility to breast cancer. If we have two doses of the gene, we know with certainty that that segment of the population, if they live long enough, has a 90% likelihood of developing breast cancer. So there are some of these small elements of discovery that are beginning to make inroads.
I wish I could come here today and tell you the problem has been solved. There are improvements with breast cancer imaging techniques and technology, which lead to early discovery and careful attention at an earlier stage, and a likely outcome is more favourable. But the cry is for more research, because unless we do gain those new insights, I'm sorry to say, we're destined to live with today's knowledge and today's outcomes.
The Chairman: That was our first round. We're quickly running out of time, so I'll ask the people on the second round to be very brief so as to be fair to their colleagues.
Ms Bridgman (Surrey North): Thank you very much for coming today.
I'm interested in the networks of centres of excellence and the rationale for them. It is my understanding that this program is going to be cut by $5.8 million. I was reading page 21 of part III of the estimates, and it gives a description of what the program is. Given our fiscal problems, this is very general, and I actually wonder why we have this program and are spending this money in this direction.
For example, the description says that it's designed to remove barriers between disciplines, ideas, and institutions, to establish an area of collaboration and networking among researchers, etc. That sounds like a communications program. We're spending all of this money on this to tell people to talk to each other. I would like some rationale as to why this program is even necessary.
Dr. Friesen: Centres of excellence is a very innovative program. I think it's fair to say that it's an experiment. My own view and judgment is that it's now into the renewal of the second phase for the first crop, of which there were 14. Five in the health care sector were successful in the competition. They ranged from protein engineering, to the bacterial diseases network, to the respiratory disease network, to the genetic network. In science, critical mass is very important.
In Canada, given the geography and the relationship.... This is an effort to do two things. One is to bring together people from different disciplines, because often the cutting edge is uncovered when people with a different perspective look at the problem. Secondly, it is also intended as a policy piece to encourage greater involvement with the private sector. It's a technology transfer, commercialization-driven initiative, par excellence. At least that is one of the intents.
.0930
In this little hand-out that I give you, you will see in the third pathway the neuroscience fund, which to me illustrates exactly the kind of result we might have anticipated or would have wished. The government invested $25 million in the neural regeneration network. This is the idea of how do nerves replicate and renew themselves. Canada has a worldwide leadership role in this position. There are multiple factors that are being uncovered that affect neuronal development and growth in many different places.
That development for the first time has attracted a $102 million investment by a consortium led by the Royal Bank, a direct result of the neural regeneration network. That's just one of the networks. I'm aware that similar discussions are under way with some of the other networks. The stage has been set.
My view is that the government's role in science is to establish the technical platforms, the fundamental base. Industry's role is to capitalize on those ideas in Canada wherever possible, and to me this is a great example of that dimension occurring. I'm not aware of any other investment of this kind in the past by the private sector in a single Canadian initiative. I think it's beginning to prove its worth.
When I travel I'm often asked about the centres of excellence internationally because it's an experiment that's beginning to be emulated in other jurisdictions. So I think it has validity.
Mr. Culbert (Carleton - Charlotte): Good morning, Dr. Friesen. As the chair indicated, we noted that in the estimates on page 22 it appears that MRC supplies over 4,000 grants and awards to Canadian researchers. Can you give us some sort of a breakdown? For example, what percentage of those research grants are awarded to women, first of all? Secondly, you touched on breast cancer, but just the major research areas, whether it be breast cancer, HIV-AIDS, health care delivery, this type of thing. Could you give us those general parameters?
Dr. Friesen: We'll supply the figure accurately, but my recollection is that between 20% and 25% are women. We have as part of our effort in the adjudication panels a goal that at least 25% of those panels should be women.
Perhaps some of my colleagues would have a more precise answer on that point.
Mr. Ian Shugart (Executive Director, Medical Research Council of Canada): I would have said that in the neighbourhood of 20% to 25% of current recipients are women. We can provide that number for the record.
Dr. Friesen: In terms of the areas of research, I believe they are listed in broad terms. MRC has the unique role, in my view, of establishing a broad platform. It's the one agency that covers the full spectrum, from the most fundamental to the most applied science. It covers the range from biochemistry to molecular biology, to applied health, to endocrinology, hormones. It covers research primarily in four different faculties: medicine, dentistry, pharmacy, veterinary medicine.
Now, when we move into health research more broadly, the scope and dimension of the institutions and faculties we relate to become even broader, some of the health economics, health policy analysis, and so on.
Mr. Culbert: Dr. Friesen, I guess the point was this. When those 4,000 grants are awarded, how do you establish the criteria, for example, and say breast cancer is the priority or HIV-AIDS is the priority that we're going to be going on this particular year? How do you establish those criteria, quickly if you could, please?
Dr. Friesen: We have great faith in the collective wisdom of scientists to see the best opportunity. I believe strongly that no committee in Ottawa can set the agenda for the detailed priorities. I'm convinced that the 4,000 scientists, who spend a great deal of the time of their lives looking at the opportunities that exist and where the breakthroughs are likely to come, are in the best position. Ultimately it's the expert panels that are drawn from the international science community that adjudicate and rank the order of excellence of each of the proposals. We go down the list until the money runs out, and all of those who are judged excellent are funded. That's how priorities are established.
.0935
The Chairman: I want to thank Dr. Friesen and his associates from the Medical Research Council. Our time is up, so we're going to ask you to vacate the spots and invite the next set of witnesses to succeed you.
We have Dr. Elgie from the Patented Medicine Prices Review Board. Good morning, Dr. Elgie. In a moment we'll ask you to introduce your colleague.
First of all, we have a maximum of half an hour for this segment. In a moment we would invite the witness to make a brief statement, no longer than five minutes. I'm sure members are noticing that I'm trying to restrict them to five minutes on the first round this morning, which includes the answer. If the witness has lots to hide, he should talk for a long time and we'll get in fewer questions.
Go ahead.
Dr. Robert Elgie (Chair, Patented Medicine Prices Review Board): Those are pretty tough rules, Mr. Chair, but I guess that's your role.
May I take a moment to introduce the executive director of the PMPRB, Wayne Critchley. And I'm Dr. Bob Elgie, the incoming chair of the Patented Medicine Prices Review Board. I'm pleased to have the opportunity to appear before you today. I've circulated copies of my opening statement, in both languages, mais je ne parlerai qu'en anglais.
I became chairperson of the Patented Medicine Prices Review Board some two months ago. I thought it would be useful to provide a brief overview of what the board is and what it does.
The mission of the board is to contribute to the Canadian health care system by ensuring that manufacturers' prices for patented medicines are not excessive. The board was created under the Patent Act as a consumer protection measure. Its mandate is to ensure that pharmaceutical patentees do not abuse the increased patent protection they received in 1987 and in 1993 by charging excessive prices.
The board also helps to inform Parliament and the public by reporting on the price trends of drugs, and it monitors the patented pharmaceutical industry as to whether it has honoured its commitments to increase its spending on research and development in Canada. The jurisdiction extends to the manufacturers' prices of drugs that are covered by the patent.
There are about 850 patented drug products on the market, with total annual sales of about $2.4 billion. That represents about 40% of the sales of all drugs, both patented and not patented, which in total were close to $6 billion last year.
When a consumer buys a drug, he or she pays the manufacturer's price, plus the wholesaler's margin, along with the pharmacist's margin and the dispensing fee. The board regulates only the price charged by the manufacturer at the factory gate.
.0940
The board's price regulation assists the other participants of the health care system by limiting the manufacturers' prices for patented drugs and giving them the assurance that those prices are not excessive.
The board is a quasi-judicial agency. It is empowered to make remedial orders if it finds that a manufacturer's price is excessive following a public hearing at which the patentee has a right to be heard.
Provincial ministers of health also have a statutory right to be represented at a hearing, and the board's rules allow others who can demonstrate an interest in the case to intervene and have standing.
Fortunately, the board has thus far been able to fulfil its mandate without resorting frequently to hearings. Instead, it has relied on a policy of voluntary compliance backed up by guidelines on what may constitute an excessive price by rigorous monitoring of prices and by the availability of tough remedial powers.
When it makes a determination that a price is excessive, the board has the power to order a reduction in the price and it can also order the recovery of any excess revenues received by the patentee. It can even double the amount recovered if it finds that the patentee has engaged in a deliberate policy of selling at an excessive price.
We are required by legislation to take into account the consumer price index, the prices of other drugs in the therapeutic class, and the price of drugs in other countries. These factors form the basis of the board's guidelines. In general, they limit the prices of new drugs to the prices of existing drugs that treat the same disease or, in the case of breakthrough drugs, to the median of the prices of that drug in other industrialized countries. Once a drug is on the market, its price may not go up any faster than the cost of living as measured by the consumer price index.
In the five years before the board was established in 1987, drug prices in Canada were going up at a rate almost twice the rate of inflation. Since then, there has been a change. The prices of all drugs together - that is, patented and non-patented - have increased at a rate close to but below, on average, the rate of increase in the prices charged by manufacturers for patented drugs. The prices of patented drugs actually declined slightly in 1994 for the first time since the board was established.
The board's first priority is the introductory prices of new drugs and here we have also seen some improvement. The guidelines have had the effect of bringing down the prices of patented drugs in Canada relative to those in other industrialized countries.
Let me turn now to the board's recent enforcement activities. Since the 1993 amendments, we have approved 11 voluntary compliance undertakings to lower prices to consumers and to recover past excess revenues of close to $11 million.
While it is impossible to measure the total effect of the board's activities, we can estimate the savings to consumers from the board's enforcement actions to be approximately $75 million from 1990 to 1994. During 1994 alone, for example, the savings to consumers were over $24 million.
Some recent undertakings have brought to our attention a problem that we are currently evaluating. Some patentees have decided that they would rather give up their patents than follow our pricing guidelines. This is done through a practice known as patent dedication. In other words, the patent is abandoned before its expiry date and usually before the drug will face competition in the marketplace. We are currently engaged in consultations on a proposal to continue to assert our jurisdiction for a defined period of time over prices in these particular cases.
The board itself is composed of up to five members, including a chairperson. All of us serve on a part-time basis. In the February budget, the Minister of Finance announced that the PMPRB's budget would be reduced by 15% over three years. We plan to achieve those reductions by continuing to focus on our core activities and through several other measures, including a study of the need to continue to review the prices of veterinary drugs in the same way we review the prices of drugs for human use.
Drugs make an important contribution to health care and all Canadians benefit from the significant advances achieved by the pharmaceutical industry. At the same time, they represent a significant proportion of health care expenditures - some 15% of the total health care bill in 1993.
During my two months on this job, I have become convinced of the benefits the board provides to Canadians.
Thank you very much.
.0945
The Chairman: Thank you, Dr. Elgie.
There are two members who wish to intervene. First Grant, then Paul.
Mr. Hill: Dr. Elgie, you've spoken of the voluntary compliance undertakings of $11 million. Last year I asked where the money went. Of course the money is going into general government revenues, not to the province,s which in many cases are paying these overcharges, and certainly not to the patients who paid for those. I was told then that this was being looked at. Can you tell me where progress is on that?
Dr. Elgie: As far as the general picture is concerned, it is still an issue that's being looked at. But I would like to remind you that's part of the issue that I mentioned we are evaluating - namely, the issue of patent dedication. Of those eleven voluntary compliance agreements, for example, some six or seven patentees abandoned their patents before the undertaking even, or shortly after it, and therefore our jurisdiction ended.
At the moment, through a consultation process, we are trying to determine whether or not our jurisdiction can be extended for a period of time. That will go along with our review and consideration of the whole issue of whether or not there should be a different distribution of the funds that are recovered. Ultimately, if the funds are recovered then where they go is not in our hands.
Mr. Hill: Would your suggestion be that the funds go to the harmed parties rather than to the federal government, which is in this sense a regulatory agency? That's what you guys are doing, regulating pharmaceutical prices.
Dr. Elgie: I understand that, and you will know that's not always an easy area to deal with.
It would be very difficult, for example, to single out individual consumers who have purchased drugs in the country. It's not so difficult to figure out hospitals, for instance, that have paid certain prices for the gate price of the drug, but I would also remind you that those folks are also in a better position to bargain on the bulk price they are paying.
It's a difficult issue, but generally I think it's one the board and the government will have to look at, because there are concerns that the excess revenues might have some other use.
Mr. Hill: Would you recommend that the harmed parties be the ones who receive those funds?
Dr. Elgie: Again, all I can say is that this is an issue the new board will be considering, but our role will be only a recommendation role.
Mr. Hill: Between 1987 and 1993 the average drug cost per prescription in Canada went from $12.48 to $24.09. This comes from Greenshields. That's a 93% increase. During the same period the CPI rose but 23.1%.
You said that in 1994 drug costs on average went down. Were you speaking just of newly regulated products or products as a whole?
Dr. Elgie: Patented drugs as a whole, on average, went down 0.48% in 1994, whereas, as you know, the CPI was about 0.19%.
For the Greenshields study they looked at different factors than we did. We simply look at the factory gate price of the drug, while they look at the package of drugs that a physician prescribes for an individual patient - it may be a mix of patented, non-patented, prescription and non-prescription, but they're usually prescription, of course - and whether or not new drugs that are more costly are substituted for old ones that were less costly. Those are things we cannot control.
However, we did meet with Greenshields, I am told, and we did relatively agree with them on their figure and they agreed with our figure. There's no dispute between us as to what's happening in the marketplace, but our data reflects only the cost of the factory gate price.
Mr. Hill: Which you admit is not the whole picture.
Dr. Elgie: No.
Mr. Hill: This other picture is certainly clouding the issue.
Dr. Elgie: No. And as I said, drug costs in 1994 were about 15% of the overall cost of the health care system, which is about the same percentage of cost of physicians' payments.
Mr. Szabo (Mississauga South): Dr. Elgie, despite your recent appointment, I would be interested in having three or four quick banters back and forth on different issues.
.0950
Drug prices in relation to the consumer price index: is this good mechanics or a benchmark against which we should find it acceptable as long as it stays there, or is there another view?
Dr. Elgie: That's always a struggle that goes on in many areas as to how one looks at the CPI as an actual reflection of inflation on its own. There are many factors you can look to. You can look at deflationary factors and all sorts of factors.
Mr. Szabo: You're not wedded to this.
Dr. Elgie: No, I'm not wedded to this.
Mr. Szabo: Thank you. That's all I wanted to know.
The board has never conducted a full hearing. Does that concern you?
Dr. Elgie: Actually it would if I wasn't satisfied in the two hearings that it resulted in voluntary compliance undertakings that met with the approval of the entire board. So I think it's a reflection of the fact that there's a recognition that the board has that capacity and will use it if it has to. By the way, I think it's a pretty good public policy approach to things.
Mr. Szabo: When a new medicine comes on and a patent is given, do we look at the original pricing base and how that's determined and whether or not that's realistic in terms of a base against which you will then measure subsequent...?
Dr. Elgie: No, that's not a factor we look into under the statute. We simply look into the price they submit, determine whether or not it's excessive according to guidelines that we've established and whether it's a line extension, a breakthrough drug or a slight to moderate improvement drug, and then we go on from there.
Mr. Szabo: Whether it's excessive - what do you mean? Against what?
Dr. Elgie: If it's a line extension drug, in other words a drug that simply may change the dose of a present drug, then we look at what is happening in the marketplace with respect to what's a reasonable comparison of that drug in the marketplace.
If it's one with little to moderate improvement, then again we look at the therapeutic class we're dealing with that's existent in the country and see whether or not it's in line with that.
If it's a new or breakthrough drug, then we look at two things: we look at comparing it to the other drugs that are in the class and we look to the media and the international price to see how it compares.
Mr. Szabo: Okay, so we are generally satisfied that its starting point is realistic.
Dr. Elgie: The starting point, yes.
Mr. Szabo: On confidentiality of information, I'm sure every member of Parliament has or will shortly receive visits from the generics and from the brand names. We're going to be into another round very soon. If you were to hold a full hearing with regard to a brand-name drug manufacturer, would that tend to expose them to reveal information that would be of use or interest, or is there sufficient disclosure within the industry that this is not a concern?
Dr. Elgie: I haven't seen the information that's tabled in the hearing. Perhaps I can ask Mr. Critchley if he'd comment on that.
Mr. Wayne D. Critchley (Executive Director, Patented Medicine Prices Review Board): Certainly.
First of all, the act provides that any pricing information is treated as confidential under the act except for purposes of a public hearing, and the hearings of the board are conducted in public. However, the act also provides that if the board is convinced by the parties that certain portions of the hearing should be conducted in private, it may conduct certain portions in private. So the mechanisms are in place to deal with that. The board would rule on a particular issue at the time.
Mr. Szabo: Due to time and space, one last quick question. The provincial governments are big players here in the drug industry, obviously, and seniors are a substantial portion of the marketplace for the drugs, and those drugs are covered. Do you feel there has been less rigour on the prices control because of the automatic coverage and the suppression almost of price sensitivity on behalf of the consumers, primarily the seniors? Do we have a problem because of insurance coverage of drugs?
Dr. Elgie: In terms of the provincial role in establishing formularies of what they'll cover, I think they do a pretty rigorous job, but even they are concerned about the issue of non-patented medications, and they've expressed that view to us and to Health Canada. As I understand it, the deputy ministers expressed their concern and there's a review of that whole issue going on in Health Canada at the moment.
Mr. Szabo: The budget is far too low. I think you have to start working with members of Parliament to make sure this $3 million is going down to $2.8 million, compared to the 15% of health care costs that drugs represent. It's way out of line. You have my support.
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Dr. Elgie: I'd like to comment on that. It's interesting that as the budget goes down, the requests to do more go up.
Mr. Patry (Pierrefonds - Dollard): Your goal or mandate is to issue remedial orders when it's found that the prices of patented drugs and medicines sold in Canada are excessive. Could you tell us how the term ``excessive'' is defined and measured? That's my first question.
Dr. Elgie: Well, ``excessive'' is defined in the statute. What exactly is excessive is not set out in the statute, but in making those determinations the statute does tell us what we shall take into account. One is the consumer price index, another is the comparative therapeutic class that you look to in Canada, and the other is the price of drugs internationally. So we are simply given those three yardsticks to start the process of developing guidelines.
As you know, some favour guidelines and some don't. I happen to favour them because if they go through a public policy process then you can amend them as changes come up, without going back to formal approval.
Mr. Patry: Is there any estimation of the savings to the Canadian health care system or to the overall economy as a result of the board's review activities on the prices of patented drugs?
Dr. Elgie: My own view after two months, and from my experience in other areas of government, is that if there is a law in place and a rule in place, it has a dampening effect on whatever activity you're endeavouring to look at. We can't measure the impact of that dampening activity simply because we exist. What we can measure is how much we have reduced prices and the probable savings to consumers annually from those. Accordingly, we've estimated that in the period of 1990 to 1994 consumers have been saved $75 million as a result of our positive activities through voluntary compliance undertakings and commencement of hearings.
The Chairman: Thanks to Dr. Elgie and Mr. Critchley. That's not a Newfoundland Critchley, is it?
Mr. Critchley: No, I'm afraid not.
Dr. Elgie: This isn't a Yorkshire Elgie either.
The Chairman: We have to check your pedigree.
Dr. Elgie: It was nice to see you again.
The Chairman: It's important that we check the pedigree. We want to know who we're talking to in case you're writing wills soon, you see. Thank you very much.
Let's move on to the next and final witness for the morning. From the Hazardous Materials Information Review Commission we have Claude St-Pierre.
[Translation]
Mr. St-Pierre, we will now hear your opening remarks which will be followed by a few questions by Members of the Committee.
Mr. Claude St-Pierre (President, Hazardous Materials Information Review Commission): Mr. Chairman, Honourable Members of the Committee, I would like to make a few opening comments.
I am pleased to be here this morning to talk to you about the Hazardous Materials Information Review Commission.
As you know, this Commission is a tribunal whose control officers have to rule on the validity of exemption requests. It is under the obligation to disclose commercial information considered confidential. This information must be disclosed under the Federal Law on Hazardous Goods or under provincial laws dealing with health and security in the workplace.
The Commission's mandate is to provide rulings on the validity of requests, as well as on the adequacy of the health and security in the workplace information on the fact sheets that accompany these products as well as to convene appeal boards to hear potential appeals of those rulings.
The Board is a federal body whose board of directors is comprised of representatives from the provinces, business and the unions. The board sits approximately twice a year. The board administers not only a federal law but also several provincial laws. Consequently, provinces recommend through the federal Minister of Health a person that will sit on the board of directors as a provincial representative. Two representatives from the employees, one from the employer as well as one from the suppliers also sit on the Commission's steering committee.
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The commission's president is its chief administrator. Since it is an inception, the Commission has been working on a cost-recovery basis and consequently has been levying fees for its services.
While recovering its costs, the Commission was able to implement immediately a system of cost management which is part of its day-to-day operations and perceived as routine by all employees. The program review was therefore easy for our organization which already produced reports almost every year for Treasury Board.
This program review was nevertheless timely and allowed for a systematic and joint review with Health Canada, which provides advice in the field of occupational health and safety to the Commission on a contract basis, since Health Canada has just been given responsibility for the Hazardous Products Act following a departmental reorganization.
At its last meeting, the Commission's board unanimously approved a report containing proposals for changes that came out of the review exercise as well as for cost reduction and increased output efficiency.
At its last meeting of September 23rd, 1994, the board also set up, on the chairman's recommendation, a tripartite Committee to which Health Canada was invited to participate and which has been mandated to review in detail the policy governing the assessment of occupational health and safety information, in order to reduce the number of claims still pending while protecting the workers' health efficiently. This Committee met from October 1994 to April 1995 and its report will be discussed at the board's meeting of May 12th, 1995.
The Commission being a tribunal and its clients being not only the claimants, that is people from the chemical industry, but also workers, it must provide a service that is not only efficient for one party but also equitable for both. In that context, the search for efficiency must be linked to the capacity to produce valid and equitable results and which may be perceived as such by all parties involved. These two goals are not always easy to balance.
In my view the Commission has a considerable impact. The compilation of the corrections made to health and safety informations found on material safety data sheets according to the Commission's screening officers' orders show that there has been 6,210 corrections for the 540 claims that have been adjudicated so far, for an average of about 11.5 corrections for each product. These corrections apply to the identification of ingredients in 24.4% of cases, toxicological properties in 28.3% of cases and the layout or clarity of informations in 21.3% of cases. Physical properties, preventive measures and first-aid account for the remaining 3.5%.
In 8% of cases, an analysis of the informations led the council to order the disclosure of dangerous ingredients never before disclosed in the formulation of the product.
I would like to end by simply mentioning that the Commission works with the Workplace Hazardous Materials Information System, or WHMIS, and that phase II of the WHMIS project could have an impact on the commission's operations. Also, on an international level, provincial and federal departments are discussing the international harmonization of health and safety information.
Thank you for your time. I would now be happy to answer your questions.
The Chairman: Thank you very much.
Mrs. Picard.
Mrs. Picard: Good morning and welcome, Mr. St-Pierre.
The 1995-1996 estimates indicate that almost 50% of goods and services expenditures, that is $171,000 will be for professional and special services. Could you tell us what services are included in these expenditures?
Mr. St-Pierre: From time to time, when necessary, the Commission requires services of a lawyer. We have a service contract with an attorney certified by Justice Canada whose pay will come out of these $171,000.
We also use this amount to pay our temporary employees. We also have a computerized system for which we sometimes need the services of a private firm which would also be paid from this amount.
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Part of the budget is also used for the expertise that the appeal boards also require. Members of these boards are ad hoc members and may obtain, in accordance with the Enquiry Act, the advice of experts whose fees could be covered by this amount of $171,000. Since we never know how many appeals there will be, we can never have a precise idea of how much this expertise will cost. This is regularly pointed out to Treasury Board.
This amount of money is not always spent. As you know, we have not heard any appeals yet, but since seven appeals have now been filed, the alloted budget will probably be spent and might not be even sufficient. We are keeping a close eye on these potential expenditures.
Mrs. Picard: Thank you.
[English]
Ms Bridgman: Thank you for coming.
I have one question and it relates to page 21, where it states that the commission was established on the understanding from cabinet that it would recover costs through its operations in revenues. It's my understanding that the commission was established in 1988. Given a start-up time of even five years, when you look at the illustration below that, in 1991-92 you were only at 8% cost recovery and in 1995-96 it's estimated at 30%. Are there any projections as to when the commission will actually recover its costs? I realize it's an open-ended statement as far as time is concerned.
Mr. St-Pierre: It's a good question, obviously. Let me give you some of the parameters around it.
Obviously when the commission started up the first thing that happened was we had about 1,500 claims filed on the day we opened or the month soon after, as industry got into compliance with the statutory requirements. It took us about a year to staff some positions at the commission, and two appeals at the Public Service Commission and Health Canada.... It was about two years before we had the staff and got our first advice documents from Health Canada. Through discussions at our council with industry and labour, it took us another six months to finalize our appeal regulations to be able to start outputting decisions.
That obviously immediately put us into a backlog situation, and although we had some revenue, the estimates at the beginning were so low in terms of the costs that the revenue generated by those first claims coming in was way below the costs. It was $350 on average per claim received, and you can understand that to administer an adjudicative process like this, it's a piddling amount of money.
The fees were readjusted upward in 1991 to try to strive for about $2,300 on average for revenue. We expect the costs right now at the commission to go up to about $6,000 per claim we adjudicate. So unless there is a huge decrease in costs or a huge increase in revenue we will not be hitting cost recovery rapidly. The board is aware of this, and it's a question of weighing the impact of the program versus its costs.
Obviously if this were entirely a business and I had to break even or go under, I would raise revenue. If I had a good enough service, I would be able to sell it. Since this is a tribunal, I don't control the people coming in to me. Inspections out in the workplace are there to make sure there is compliance with the requirement to come in, but it's an extremely difficult situation. How can you inspect for trade secrets when the whole idea is to keep them secret and confidential? One could see that one could spend a lot of time and money to ferret out trade secrets. So it's a difficult area to work in.
We have been working, as the commission mentions in this document, with the Ontario Ministry of Labour with a fair amount of success in terms of ferreting out non-compliance. It then takes on the part of the agency involved in the provinces. It's a lot of work to make sure there's a follow-up and that the corporation will either reveal the ingredient or claim to trade secrecy or withdraw the product from the market.
Ms Bridgman: Has there been any discussion in the administration as to when this objective will be achieved?
Mr. St-Pierre: There are ongoing discussions every council meeting about what we can do about this. Obviously the industry representatives on council are striving for us to hit full cost recovery. Other members are certainly listening to and looking at what's happening, and they are trying to weigh the benefits versus the costs of providing the service as it is now.
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We feel, as everybody including the industry members on council signed off on the cost-recovery report to Treasury Board last September, that the commission under the present statutory requirements is doing its utmost to be as efficient as possible, minimize costs and achieve the highest cost-recovery ratio possible. The pros and cons of changing the program to meet cost recovery is currently being debated at council.
Ms Bridgman: There's no actual projection that we'll achieve this in five or six years, or anything like that.
Mr. St-Pierre: The projection, as it's presented in the outlook, is that it will be 40% in three years. There is no projection for full cost recovery. I think everybody realizes that under the present system it will not be achievable.
Mr. Culbert: Good morning, Mr. St-Pierre.
A couple of weeks ago we had representation here in Ottawa, at their annual meeting, from the Canadian Association of Firefighters. One of the concerns and proposals its representatives brought forward to me, and I'm sure to a number of my colleagues, was a computerized system so that when responding to a spill, accident or whatever the case may be involving dangerous goods they would be able to immediately tap into it and find out what the product was on the truck or rail car and the actions that should be taken immediately to remedy the situation. When I questioned them somewhat, they told me that in many cases their distinctive notations on the vehicle were quite often damaged in the fire, accident, explosion or whatever the case, and they had no idea what they were dealing with.
Have you had anything on that proposal from the Association of Firefighters? If so, do you see any possibility of the industry concurring with that? There would have to be some trust there, going back to your confidentiality of products, access and so on.
Mr. St-Pierre: With regard to the transport of dangerous goods regulations and requirements that help out firefighters, if all the documentation and signage is destroyed it certainly puts them at a disadvantage. I'm not the best person to talk about it, but Transport Canada still has CANUTEC, the Canadian emergency response system, which I'm sure firefighters phone when they have the identity of the product being transported in the case of a disaster. I am told it is a relatively good system and they have, on a voluntary basis, quite a collection of material safety data sheets to be able to advise emergency workers in that type of situation.
There has been some discussion bandied about in the community with government officials in the past about potentially establishing some sort of central repository where all of the information pertaining to hazardous substances and products sold in Canada could be kept to respond to emergency calls like this. I think that's something to potentially be debated with CANUTEC, if there was an obligation. The problem would arise potentially in the case you were citing that if all the information is destroyed it would be difficult for them to get it. But if you get the product identifier from the supplier, obviously you can then get that information.
As it touches my organization, there has been potential for exactly that to be built into our act, where we could potentially work with Transport Canada to be part of that chain of information for products for which there is a claim to confidentiality. There are some things to work out with Transport Canada, but that is envisaged.
As you were saying, the most important thing is if we don't have all the information at the commission because companies have not filed all their claims, then there will be situations where there will still be a window of risk.
I can't really quantify what that would be. I don't have a real idea of what it's like out there in terms of non-compliance. The project we had with the Ontario Ministry of Labour where they sampled on a random basis tended to indicate there could be up to 10% non-compliance with the trade secrets requirements for hazardous materials. That is a bit lower than what a similar American study found.
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In a lot of cases I think we can recognize that there is also a lack of information on the part of chemical suppliers as to what exactly they must disclose, and that a fair number of those non-compliance situations could be resolved by disclosing the information where it's not really a valid trade secret. But there would still be a fair number of products out that are not being disclosed.
Mr. Culbert: Do you see the possibility of a system like this coming into place, from the information you have now? The way I understand it, it is similar to the RCMP CPIC system for car licence plates. They look at a truck or rail car licence number and go through the computer, and it comes back with the material on how to address that situation.
Mr. St-Pierre: I'd like to help you out, but I would say Transport Canada officials, who are responsible for the transport of dangerous goods, probably have a lot more information than I do.
Mrs. Ur (Lambton - Middlesex): My question is regarding the commission. There are 17 members on the commission. There is one member from the federal government, 12 members from the provinces and territories, two from organized labour, and the suppliers and employers each have one. Who do the 12 from the provinces and territories represent?
Mr. St-Pierre: They represent the provincial governments.
Mrs. Ur: I understand that.
Mr. St-Pierre: They are usually chosen -
Mrs. Ur: Who are they?
Mr. St-Pierre: - from the provincial OSH agency or department, OSH being occupational safety and health, and they are recommended to the Minister of Health, according to the act, by the provincial minister responsible for OSH.
Mrs. Ur: In response to that, I find that rather an imbalance compared to employers; employers are represented there as kind of token members.
Mr. St-Pierre: I didn't draft the act so I can't really comment on it.
Mrs. Ur: No, I didn't say you did.
Mr. St-Pierre: The only thing I can say to the committee is that it has been pointed out by employers and supply representatives that they felt there was a certain imbalance in the representation.
Mrs. Ur: I can well see that.
Mr. St-Pierre: And I think labour representatives made the same comment for labour.
Mrs. Ur: Is there any move to change that?
Mr. St-Pierre: Not that I'm aware of.
Mrs. Ur: Why?
Mr. St-Pierre: Although they may have made the comment, I'm not sure they have proceeded to do much more about it, and I don't think the rest of the council thought that was a potential problem, since they did not raise it either. As far as anything else goes, I don't expect -
Mrs. Ur: Well, you wouldn't raise it if it didn't relate to you, of course. If you were in the positive, I don't think you would raise the issue.
Mr. St-Pierre: This also depends on how you see the role of council, whether you see it as being to strive to achieve consensus and to do so by discussion or you see it as a system of opposing parties where you might then perceive a problem. I don't quite know how they perceive that role.
[Translation]
Mr. Patry: Good morning, Mr. St-Pierre. You mentioned the Workplace Hazardous Materials Information System. Your Commission must balance the right of workers to be informed on the risks associated with hazardous materials with the right of employers to protect confidential business information. Is your Commission in a position to determine if its objectives of reducing the number of illnesses and accidents has been met?
Mr. St-Pierre: That is an excellent question. We do not have the capacity to verify that with the data provided to us. The data is collected and compiled throughout Canada by the workers' compensation boards at the provincial level, as well as by Human Resources Development Canada at the national level, among others.
The problem of occupational diseases which all workers' compensation boards have to face is that these are diseases which usually appear after prolonged exposure. In many cases, the worker has left the job in which he was exposed many years before to the contaminant which caused the disease. It is therefore extremely difficult to establish a link between a specific product or even a specific exposure in the workplace and an illness which develops 20 years later. I do not think that this problem has been solved with the compilation of data.
Thank you.
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Mr. Patry: Thank you, Mr. Chairman.
[English]
The Chairman: Mr. St-Pierre, thank you very much.
There's the bell and the countdown is on. We have about 20 minutes until a vote. We don't have this room beyond 11 o'clock, so we're going to use about 10 of those 20 minutes and then adjourn the session until Thursday.
I remind you that on Thursday we have witnesses first from the policy and consultation branch of the Department of Health, and then from the corporate services branch. At 10 o'clock we'll go in camera to spend an hour on our report.
We will now go in camera, which means we should now clear the room.
[Proceedings continue in camera]